As the United Nations Conference on Climate Change gets
under way in Bali we are all wondering if the delegates will
come up with resolutions that will be supported and implemented
by their respective governments or whether the old vested
interests will prevent any serious measures being taken to
save the planet.
Let’s acknowledge that coming up with solutions is not
easy. Most experts agree that burning fossil fuels is a major
contributing factor to global warming. But how many of us
would willingly give up our cars and start using public transport?
If we lived in London, New York or Singapore for example it
would be no problem, as those cities have an excellent public
transport infrastructure. But if we lived in cities like Los
Angeles or Jakarta, public transport is almost non-existent
or of a standard that only those who have no choice will use
it. If the world agreed no more cars should be produced, China
would rightly cry out that they have only one car to fifty
people so why should they not be allowed to catch up with
the United States that has one car for every two people?
If the auto and oil industries were to be shut down overnight
would you not complain if you were in charge of an oil-producing
country or worked for an oil company? Will the unions stand
by as millions of jobs disappear? Will we be happy to see
the value of our investments falling as the great industries
of the world slow down?
The fact is, it will be unrealistic to expect any dramatic
changes being made because so many different interests are
at stake. Whatever changes are made are likely to be a series
of compromises and watered down resolutions. Better than nothing
maybe, but unlikely to make a major impact on the changes
that we are seeing. So how is this likely to affect us personally?
What are the immediate threats?
Much depends on where we live. If you live on the sea front
you are at risk of storm damage and high tides. If you live
near a river or in a low-lying area you are at increasing
risk of flooding. One solution is to move, but this may not
be a practical or even desirable solution. It could even be
seen as an over-reaction. Nevertheless the risk is a real
one and if you are staying put at least take practical steps
so that you are prepared for an emergency and of course make
sure you are adequately insured. Check the small print of
your insurance policy to make sure you are covered for any
eventuality.
If you have a car make sure that the policy also includes
flood loss or damage. Sea water and engines don’t mix
too well!
It goes without saying that if you are in expat living in
Bali you must have proper medical insurance including evacuation.
The chance of injury or subsequent illness resulting from
a storm or flood increases the need.
Power cuts are becoming part and parcel of life in Bali. This
is the downside of the island’s success in bringing
back the tourists and attracting so many new developments.
But power cuts will certainly be more frequent and more prolonged
in the event of severe storms. So make sure you have adequate
torches, candles and emergency non-perishable food supplies
in case of prolonged blackouts. If you run a business, a back-up
power supply could prove indispensable to keep your business
running.
Make sure you have a sensible amount of cash handy in case
banks are shut and ATM’s don’t function. A credit
card or debit card linked to an offshore account could prove
essential if you are likely to spend time out of the country.
What about the longer term?
The world is a global village and events elsewhere can impact
all corners of the earth. Bali has actually come off quite
lightly so far in terms of the effects of global warming.
It has suffered nothing on the scale of parts of the United
States or long-suffering countries such as Bangladesh. Nevertheless,
climate change has the potential to negatively affect the
growth of the world’s economies. Extreme weather conditions
can reduce crop yields and push up prices. The overall effect
could be global inflation. Consequently the models and calculations
we make to determine how much we should save today to ensure
we live comfortably tomorrow may have to be reviewed. We should
seriously consider putting more into our pension plans and
also look more closely into how the plans are structured.
Are they, for example, invested in assets that are inflation
proof? Traditional bonds may lose their value if the underlying
currency devalues.
Is there a positive side?
There will undoubtedly be opportunities. Some industries such
as construction and maintenance are going to be in growing
demand. Mr. Fixit in Sanur is likely to be rushed off his
feet! If you have skills that can be put to use in emergencies
or in reconstruction there will be ample opportunity to use
them.
There are also investment opportunities for those who cannot
give up their regular day jobs. Instead of buying shares in
general industrial companies for example, you could consider
investing in agriculture (where prices could soar if supply
falls behind demand) or in wind power or solar energy companies
and even auto companies that are developing environment-friendly
hybrid cars. Few people have the time or the facility to buy
individual shares or commodity futures but all the above can
be accessed through mutual funds. At present, few are devoted
to agriculture or climate change but with growing public awareness
they are sure to proliferate. As with most investments, the
people who get in early are likely to see the highest returns.
So expect the best but be prepared for the worst!
Bali is blessed with a generally very favourable climate compared
with most places in the world. As floods and drought affect
other countries, even more people may decide to visit or remain
in Bali. Perversely, Bali could even benefit from climate
change to a degree. Hosting the present conference is an example!
But things can go wrong, and we may see the negative effects
of climate change, hence the wisdom of being prepared.
To anyone attending the conference and reading this column
the world, as well as Bali, is looking to you to put Bali
on the map by turning talk into real action. Good luck!
Colin Bloodworth is a senior adviser with Financial Partners.
The opinions expressed are his own. If you have any questions
regarding personal finance you may contact him at
021 520 8099 or colin.bloodworth@financial-partners.biz
